Market Trends India

CMYK

Trends 2000

Market Trends India L

et me begin with a poser—what does Indian IT mean to you? Chances are that you’ve already started thinking about our successes in the software exports arena. Amid all the applause for Indian software exporters, achievements in the domestic market tend to get sidelined. Agreed that software and ser vices exports from the countr y have been growing at an enviable pace, but the domestic IT market can also boast of impressive facts and figures. Consider this. India is one of the fastest growing IT markets in the world, the fastest growing PC market in the Asia-Pacific region, and also the country with the fastest growth in Internet usage in this region. It was in the last fiscal (1999-00) that domestic IT spending bounced back after three years of slowdown. And what a revival it was. A 12 percentage-point improvement in annual growth rate is no mean achievement, after all. IDC believes that there is tremendous momentum in the domestic IT market today, which will help the industr y tide over the minor slowdown being predicted for the economy in the current fiscal. Over the next five years, the domestic IT industry is predicted to grow at a CAGR (Compound Annual Growth Rate) of 28 percent, which is among the highest in the world.

the PCs marketplace, it’s fairly obvious that PCs are fueling growth in the hardware market. PC shipments crossed the million mark in the last fiscal and are likely to shoot beyond two million in the next. That makes India the fastest growing PC market in the Asia Pacific region. If the Indian market continues to grow at this pace, which it certainly will, we’re slated to become the second largest PC market in the region by 2003. Perhaps the single largest contributor to this impressive growth is the burgeoning home segment. Today, more

Personal Computers What drives the Indian IT market? As is the case with most nations in the early stages of the IT maturity curve, the Indian market is primarily hardware driven. The hardware sector currently accounts for around 56 percent of total IT spending and is growing faster than other sectors of this industry. Looking at the frenzy in

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Whether it’s PC shipments, Inter net Internet usage, or the ser ver server market, the IT industr industryy seems poised for impressive growth ahead

CMYK

Trends 2000 than a third of all PCs shipped in a year make their way to the home segment; and the way things are moving, this share will only improve in future. This obviously means that no vendor can afford to neglect this segment. The winners of the future will be the ones who have in place a focused consumer strategy to address the home segment.

drivers of the ser ver market. In other words, ser vers will transform themselves as engines to hosted applications. One expected development is the blurring of the defining line between SIAS and RISC Unix servers. While SIAS will continue to cater to the bulk of requirements, especially in the SME segment, the entry-level RISC/CISC Server (non-SIAS)

The last two years have seen an explosive growth in Internet usage in India. We already have more than a million subscribers. And this growth shows no signs of slowing down IDC’s “Millennium Home” study reveals that the most important reasons for purchasing a home PC revolve around enhancing the family ’s computer skills. In an era where people have realized the importance of being IT literate, this finding springs no major surprises. Another important finding is that while the chief wage earner of a household is the primar y decision-maker insofar as PC purchase is concerned, family and friends play an important role in influencing the decision. The survey also reveals that the average home PC user is around 28 years old—however, IDC believes that as computer education in schools becomes more widespread and more children start using PCs at home, the average home PC user of the future might be younger.

Servers Ser vers—both Standard Intel Architecture Servers (SIAS) and RISC/Unix—is another categor y that’s showing impressive growth. New areas—such as ISPs, Web hosting, and CRM—besides the more established applications such as ERP contribute to this explosive growth. Data centers and Application Service Providers (ASPs), the latest buzzwords doing the rounds in the industr y, will be the future

space will see the most activity in the ser ver market. All vendors are investing heavily in channel build-up, training, and motivation to reach out to the SME segment and dot-coms. These factors, coupled with further drop in prices of the lowend models of this class, will see this class increasingly fighting in the same space as the SIAS. Increasing acceptance of Unix for Web-related activity in the SME segment will also contribute to growth in this class.

Internet Usage The last two years have seen explosive growth in Internet usage in India. We already have more than a million subscribers. And this growth shows no signs of slowing down, thus making India the fastest growing Internet market in the AsiaPacific region. The Internet boom has had a positive impact on the IT industry. While Internet access is slowly emerging as an important purchase decision criterion for the home segment, investments by Internet Service Providers (ISPs) and other Internet companies to set up their infrastructure will remain an important accelerator for domestic IT spending. In the wake of the growing prominence of the Internet, there’s been a lot

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of debate on the future of PCs, with people spelling out doom for them. The rise of thin clients and information appliances (or alternate Internet access devices) have led to this debate. IDC believes that while all this makes good copy, the truth is further away. The PC is not dead and buried, it still has a lot of life. The PC will maintain its dominance in the commercial segment, and will continue to have a place in homes. There’s been an increase in activity in the Information Appliances arena, but IAs will not eat into PCs. Rather, they would complement PCs in a digital home. There are a number of interrelated issues that will limit the adoption of information appliances in India. For one, we have to consider whether users are ready to choose specialized products over a general-purpose product. Most information appliances will perform only one function, whereas a PC is a powerful multifunctional device that can do a host of other stuff apart from Internet access. Price and availability are other important issues. Till these products become available in the market, users will remain confused about their real benefits and the price associated with them. Another crucial factor that might limit the adoption of information appliances is the development and proliferation of supporting technologies such as broadband and wireless. One must also keep in mind that information appliances are merely enabling devices. It’s the content and ser vice that consumers will value. This implies that vendors must ensure availability of ser vices and content in order to promote the adoption of new information appliances. That, we believe, will take some more time, thus ensuring a prominent place for the PC as an access device in the Indian marketplace. Aditya Pant heads research operations at IDC India